Kingfisher finances its operations using a number of funding instruments, including medium term note debt, bank borrowings and leases.
As at 31 January 2019 Kingfisher had £48 million of net cash on the consolidated balance sheet. However, the Group is levered when capitalised lease debt that, in accordance with accounting standards, does not appear on the balance sheet is included. The ratio of the Group’s lease adjusted net debt (capitalising leases at 8 times annual rent) to adjusted EBITDAR is 2.6 times as at year end. At this level Kingfisher has financial flexibility whilst retaining an efficient cost of capital.
A reconciliation of lease adjusted net debt to EBITDAR is set out below:
|Property operating lease rentals||425||408|
|Financial (net cash)||(48)||(68)|
|Property operating lease rentals (8x)(1)||3,400||3,264|
|Lease adjusted net debt||3,352||3,196|
|Lease adjusted net debt to EBITDAR||2.6x||2.4x|
(1) Kingfisher believes 8x is a reasonable industry standard for estimating the economic value of its leased assets
The introduction of IFRS 16 (see page 21 of the FY 18/19 Results Announcement for further details) is expected to result in a lower adjusted net debt to EBITDAR ratio of c.2x, reflecting a lower IFRS 16 lease liability than the 8x adjustment above.
Kingfisher aims to retain its solid investment grade credit rating whilst re-investing in the business and the transformation plan, and paying a healthy annual dividend to shareholders. After satisfying these key aims and taking into account the economic and trading outlook, any surplus capital is returned to shareholders.
On 25 January 2016 Kingfisher announced its intention to return around £600 million of capital to shareholders between 2016/17 and 2018/19.
During 2018/19, £140 million of shares (51 million shares) were repurchased via share buyback. Cumulatively therefore, £600 million of shares (191 million shares) have now been repurchased.
Kingfisher regularly reviews the level of cash and debt facilities required to fund its activities. This involves preparing a prudent cash flow forecast for the medium term, determining the level of debt facilities required to fund the business, planning for repayments of debt at its maturity and identifying an appropriate amount of headroom to provide a reserve against unexpected outflows.
For any questions or queries please contact:
Group Tax and Treasury Director
Group Investor Relations Director